The Never-Ending Wealth-Tax Campaign

Wealth taxes are like a specter in search of a host, and an already overtaxed New England state may be the first to succumb. Vermont lawmakers want to tax residents’ unrealized gains, hoping to finally break the barrier that’s kept them from draining asset values year after year.

The state’s top tax legislator has spent recent weeks pushing bills that would dial up taxes on high earners. The biggest reach is a proposal to tax the paper gains from assets above $10 million. The plan would slap Vermont’s 8.75% top income-tax rate on half of those gains. That means a family whose business gains $3 million in value could owe $131,000, even if they don’t take out a single dollar of cash.

Like levies on capital gains, the new tax would cut into investment returns and leave well-off Vermonters less reason to deploy their money in wealth-producing investments. Unlike a capital-gains tax, the wealth tax would create a mess of confusing estate appraisals and endless disputes with the revenue department.

This is why no state currently taxes unrealized gains, but the author of the Vermont plan says the novelty is the point.

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